Africa has a reputation for being on the vanguard of mobile money services, but regulations forcing mobile operators to partner with financial institutions are strangling further growth in the sector, say industry players and market analysts.

Recent remarks by Airtel Nigeria CEO Segun Ogunsanya sparked a new round in the debate over mobile money regulations. Ogunsaya has called for a review of mobile money rules in the country, saying expansion of mobile financial services has been slow in proportion to the jump in mobile data traffic. The problem, he said, is that the services are being led by banks instead of telecom companies.

Ogunsanya wants regulators to lift restrictions on telecom firms’ involvement in mobile money and allow the sector to be led by telecom companies. This will allow the market to reach its full potential, help expand retail banking and drive financial services for the large population of people who do not have bank accounts, he said.

“The overwhelming majority of the adult population is unbanked, however, mobile penetration is approximately 78 percent,” Ogunsaya said, “The market opportunity for mobile money is therefore vast.”

In Nigeria and other African countries, mobile operators are allowed to partner with financial institution to offer mobile financial services over their networks. However, the majority ownership of the service is assigned to the financial institutions.

Nigeria has 174 million people who own mobile phones and is the largest among the fast-growing economies of Africa. But almost 57 percent of adults do not have access to formal financial services, according to research carried out by the Grameen Foundation, a U.S.-based NGO that provides financial services and information to low-income households. Only 0.1 percent of adults actively use mobile money, according to the research.

“I agree with Airtel in the case of Nigeria—the bank-led business model slows down the process,” said senior analyst at Ovum Research, Thecla Mbongue. “However, I think that the main issue is the banks’ approach. So far, the Nigerian banks give the impression of marketing MFS (mobile financial services) as just an additional product or tool available to their already banked users. MFS were initially launched to reach the unbanked populations.”

Banks seem to prioritize clients who generate large transactions, rather than focusing on smaller transactions generated by, potentially, a huge number of users, Mbongue said. There should be increased involvement of telecom companies at least in the marketing of services, since mobile service providers have wider and stronger distribution channels than banks, she said. An exception is South Africa, where bank penetration is higher than in most other African countries.

Other countries that have recently put restrictions on the involvement of telecom companies in mobile money services include Ghana and Uganda. It is now illegal for telecom companies to offer mobile money services in Uganda. In Ghana, MTN, Airtel and Tigo offer mobile money services, which have grown from a transaction value of 2.4 billion Ghanaian new cedi (US$700 million) in 2013 to 11.6 billion Ghanaian new cedi last year. However, the central bank has set a six-month deadline (from July 6) for the telecom companies to establish a separate business entity to handle their electronic money services.

Those in favor of easing regulations on mobile operator financial services point to Kenya-based Safaricom. The company, which launched the groundbreaking M-Pesa service, is the most successful mobile money operator in Africa. The mobile-phone based money-transfer service is led by the telecom company, in partnership with local banks.

“Safaricom is an exception because when it launched, the authorities did not notice it much, thinking it was just another VAS (value-added service) and not knowing what to expect,” Mbongue said. “The success of M-Pesa lies partly on Safaricom’s dominant market share, strong distribution channel countrywide and strong involvement in the marketing and distribution process.”